[Federal Register Volume 62, Number 221 (Monday, November 17, 1997)]
[Notices]
[Pages 61271-61276]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-30144]
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DEPARTMENT OF COMMERCE
International Trade Administration
[A-429-601]
Final Results of Antidumping Duty Administrative Review of Solid
Urea From the Former German Democratic Republic
AGENCY: Import Administration, International Trade Administration,
Department of Commerce
ACTION: Notice of final results of antidumping duty administrative
review
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SUMMARY: On July 8, 1997, the Department of Commerce (the Department)
published the preliminary results of its administrative review of the
antidumping duty order on solid urea from the Former German Democratic
Republic (GDR). The review covers one manufacturer/exporter, SKW
Stickstoffwerke Piesteritz GmbH (SKWP), and the period July 1, 1995
through June 30, 1996. We gave interested parties an opportunity to
comment on our preliminary results.
EFFECTIVE DATE: November 17, 1997.
FOR FURTHER INFORMATION CONTACT: Nithya Nagarajan or Steven Presing,
Office VII, Import Administration, International Trade Administration,
U.S. Department of Commerce, 14th Street and Constitution Avenue, N.W.,
Washington, DC 20230; telephone (202) 482-3793.
SUPPLEMENTARY INFORMATION:
Applicable Statute and Regulations
Unless otherwise indicated, all citations to the statute are
references to the provisions effective January 1, 1995, the effective
date of the amendments made to the Tariff Act of 1930 (the Act) by the
Uruguay Round Agreements Act (URAA). In addition, unless indicated, all
citations to the Department's regulations are to the regulations, as
codified at 19 C.F.R. part 353 (1996).
Background
On July 8, 1996, the Department published in the Federal Register
(61 FR 35712) a notice of ``Opportunity to Request Administrative
Review'' for the July 1, 1995 through June 30, 1996, period of review
(POR) of the antidumping duty order on solid urea from the former GDR.
In accordance with 19 CFR 353.22, the Ad Hoc Committee of Domestic
Nitrogen Producers (petitioners) requested a review for the
aforementioned period. On August 15, 1996, the Department published a
notice of initiation of antidumping review (61 FR 42416, 42417). The
Department is conducting a review of this respondent pursuant to
section 751 of the Act.
On July 8, 1997, the Department published the preliminary results
of review ( 62 FR 36492). The Department has now completed the review
in accordance with section 751 of the Act.
Scope of Review
Imports covered by this review are those of solid urea. At the time
of the publication of the antidumping duty order, such merchandise was
classifiable under item 480.30 of the Tariff Schedules of the United
States Annotated (TSUSA). This merchandise is currently classified
under the Harmonized Tariff Schedule of the United States (HTS) item
number 3102.10.00. These TSUSA and HTS item numbers are provided for
convenience and Customs purposes only. The Department's written
description of the scope remains dispositive for purposes of the order.
Analysis of Comments Received
Comment 1: Affiliation. Petitioners argue that the Department must
adjust SKWP's cost of production to reflect an appropriate amount for
depreciation of production equipment transferred to SKWP by
Stickstoffwerke AG Wittenberg-Piesteritz (STAG). Petitioners contend
that STAG is under the ``control'' of SKWP and that in accordance with
section 771(33) of the Act, the Department must find SKWP and STAG to
be ``affiliated'' persons. According to petitioners, the Department is
required by sections 773(f)(2) and (3) of the Act to disregard STAG's
``transfer'' price to SKWP of the production equipment and substitute,
in
[[Page 61272]]
its place, the higher of market value or cost.
Respondent insists that there is no evidence of affiliation between
SKWP and STAG. Respondent maintains that the production equipment was
purchased at a market price and that the Department verified SKWP's
reported depreciation expense. Respondent adds that the purchase
transaction between SKWP and STAG was scrutinized by the German
government and independent auditors, and found to be properly valued
through arm's-length negotiations.
Department's Position: We disagree with petitioners' contention
that the purchase of the production equipment was a transaction between
affiliated persons. Consequently, for the final results of this review,
we have not adjusted SKWP's reported depreciation expense pursuant to
sections 773(f)(2) and (3) of the Act.
In 1993, SKWP and STAG concluded an agreement whereby SKWP
purchased certain assets from STAG. These assets consisted largely of
the accounts receivable, inventories, and production equipment from a
nitrogen production facility owned by STAG. As part of this contractual
arrangement, SKWP also assumed responsibility for certain debts and
other obligations of STAG's nitrogen facility, including accounts
payable and costs associated with old, environmentally hazardous sites
formerly owned by STAG. In accordance with German generally accepted
accounting principles (GAAP), the total purchase price paid by SKWP
determined the cost of the assets acquired by the company. Because the
degree of convertibility to cash was taken into consideration in
allocating the purchase price, much of that price was allocated to
accounts receivable and other liquid assets with very little of the
price allocated to the capital equipment acquired in the transaction.
In addition to the nitrogen facilities, SKWP also acquired from
STAG as part of the purchase transaction, a five percent interest in
VCE Vertriebsgesellschaft fur Chemische Erzeugnisse Piesteritz GmbH
(VCE), a distributor of STAG's (now SKWP's) urea products. STAG
continued to hold the remaining 95 percent of VCE's shares. At the same
time, SKWP and STAG entered into a five-year agreement under which VCE
became the exclusive distributor of SKWP's urea products and each
company agreed to share in the profits or losses of VCE in accordance
with their respective interests in the distributor. As part of this
contractual arrangement, STAG also agreed that SKWP would assume
complete operational control over VCE, providing all management and
sales personnel as well as accounting, management and support staff.
Further, SKWP assumed absolute control over all pricing and production
decisions at VCE. Thus, STAG has, by contract, given up whatever
control over VCE it would otherwise have by virtue of its ownership
interest.
Petitioners cite, as evidence of affiliation between SKWP and STAG,
the profit and loss sharing arrangement and SKWP's operational control
over VCE. Indeed, petitioners assert, ``STAG is wholly `reliant' upon
SKWP for income (through VCE), and STAG's pricing of assets sold to
SKWP have affected the cost of the subject merchandise, as well as
future income, to STAG.''
For the following reasons, we cannot agree with petitioners. First,
the temporary profit and loss agreement between SKWP and STAG is part
of a larger asset purchase arrangement between two companies. It is
part of the consideration that STAG received from SKWP for the assets.
Therefore, as discussed in greater detail in response to Comment 2,
below, we consider any profits accruing to STAG under the agreement to
be part of the arm's-length purchase price paid by SKWP for the assets
it acquired.
Second, petitioners do not allege (and nothing in the record
suggests) that SKWP and STAG were affiliated at the time of the sale of
the assets. STAG may be dependent upon SKWP to act in good faith and to
pay whatever additional monies are owed for the assets, but that does
not mean STAG and SKWP are ``affiliated'' within the meaning of the
statute. STAG did not have to sell its equipment and other assets to
SKWP. SKWP was not in a position to dictate the terms of the sale.
Rather, each company was pursuing its own economic interests and those
interests were in no way mutual. STAG's interest was to obtain the
highest price possible for its assets at the time of the sale. Of its
own choosing, it accepted an initial payment and the potential of
additional payments over a five-year period. Nothing about this
transaction put SKWP in a position to ``legally or operationally * * *
exercise restraint or direction'' over STAG when it came to the price
paid for the production equipment.
Third, there is no evidence on the record to suggest, as
petitioners contend, that STAG would understate the value of the
capital equipment that it sold SKWP in the hopes that SKWP, which
controls the price and volume of urea products sold through VCE, would
obtain greater profits on sales made by VCE. In fact, contrary to
petitioners' assertions, STAG's pricing of the assets sold to SKWP does
not affect directly the level of VCE's profits since VCE's costs (and
thus its' profits) are determined based on the price SKWP charges VCE
for urea and not on SKWP's production costs.
Petitioners also rely on two other points to advance their argument
that SKWP and STAG are affiliated persons. First, petitioners note that
VCE's financial results are consolidated with those of SKWP. According
to petitioners, this would only be possible if STAG's 95 percent
interest was indistinguishable from SKWP's interest. Second,
petitioners consider STAG's agreement to absorb certain personnel costs
associated with the purchase of its assets to be an indication of
affiliation between STAG and SKWP.
In response to the first point, the consolidation of financial
statements is done for accounting purposes when a parent company
controls the operations of a subsidiary entity. In the present case,
the consolidation of VCE's financial statements into SKWP's is merely
an indication that SKWP controls VCE, not that SKWP controls STAG (or
that both companies control VCE). As explained above, STAG contracted
away its right to control VCE as part of the five-year distribution
agreement.
In response to the second point, STAG's commitment to absorb
certain personnel costs resulted from the arm's-length negotiations
that took place between the parties. Stated differently, absorption of
these costs was part of the quid pro quo that enabled STAG to obtain
the highest price possible for its assets at the time of sale.
In conclusion, the Department finds no evidence to consider STAG
and SKWP to be affiliated within the meaning of section 771(33) of the
Act, and for purposes of these final results, will continue to treat
them as parties to an arm's-length transaction in relation to the sale
and acquisition of SKWP's production equipment.
Comment 2: Profit Adjustment. Petitioners argue that even if the
Department were to find STAG and SKWP unaffiliated, we should account
for STAG's share of VCE's profit or loss as compensation for the assets
transferred to SKWP, and add the value of these profits and losses to
the reported costs of production.
Respondents counter that there is no statutory authority to add
profit to a COP calculation, and these profits and losses are properly
excluded from the reported costs.
[[Page 61273]]
Department Position: We agree, in principle, with petitioners that
any profits that accrue to STAG under its profit and loss sharing
arrangement with SKWP should be considered part of the purchase price
of the assets acquired by SKWP from STAG. As discussed in our response
to comment 1, above, the five-year arrangement between STAG and SKWP to
share in the profits and losses of VCE, a distributor of SKWP's urea
products, was concluded as an integral part of the asset purchase
agreement between the two companies. Under the arrangement, SKWP agreed
to forego its share of VCE's earnings from urea sales as part of the
compensation it paid to STAG for the assets acquired. As such, any
profits paid to STAG under the arrangement can reasonably be viewed as
part of the purchase price for the assets.
We note, however, that evidence on the record shows that from 1993
to 1996 (the first three years of the arrangement), VCE incurred only
losses on its sales of SKWP's urea products. Thus, as of the POR, STAG
has not received any additional compensation for the assets it sold
beyond that paid by SKWP at the time the agreement was concluded. In
addition, we note that, were VCE to earn profits in the final two years
of the agreement, such profits would first be netted against VCE's
accumulated losses (in accordance with the arrangement) before
distribution to STAG.
Finally, as a theoretical matter, we disagree with petitioners that
all profits paid to STAG under the arrangement should go to increase
the value of the production equipment purchased by SKWP. Rather,
consistent with SKWP's GAAP accounting for all of the assets it
acquired from STAG, any additional compensation in the form of VCE
profits paid to STAG would first be applied to other, more liquid
assets to reduce any remaining difference between their value at the
time of purchase and the amount of the purchase price allocated to
them.
Comment 3: Renovation Project. Petitioners argue that the
Department should increase SKWP's cost of production to account for
amounts received from the German government to offset expenses
associated with an ongoing renovation project at its nitrogen facility.
According to petitioners, the Department routinely considers renovation
costs to be part of the cost of production. In this regard, petitioners
highlight the fact that SKWP has accounted for costs associated with
the project as part of the company's operating costs. Citing Certain
Iron Metal Castings from India, 46 FR 28463 (1981), petitioners contend
that it is the Department's long-standing practice not to reduce costs
to reflect the benefits received from government subsidies.
SKWP argues that, because it did not incur the renovation costs for
which the subsidies were granted, these costs could not be part of the
company's cost of production.
Department's Position: We disagree with petitioners. Costs
associated with the renovation of SKWP's production facility were not
incurred by SKWP. The costs in question were funded by the German
government through reimbursement which was recorded in the audited
financial statements of SKWP.
Contrary to petitioners' apparent belief, the Department's long-
standing practice is to base COP upon a producer's actual costs and not
to restate such costs to exclude government payments, linked to
specific costs. See, e.g., Red Raspberries from Canada; Final
Determination of Sales at Less Than Fair Value, 50 FR 19768 (1985);
Certain Iron Construction Castings from India; Final Determination of
Sales at Less Than Fair Value, 51 FR 9486, 9488 (1986). This practice
has been upheld by the courts on many occasions. See, e.g., United
States v. European Trading Company, 27 CCPA 289, C.A.D. 103 (1940);
Washington Red. Raspberry Comm. v. United States, 657 F. Supp. 537 (CIT
1987); Alhambra Foundry Co., Ltd. v. United States, 685 F. Supp. 1252
(CIT 1988). Indeed, in the one case cited by petitioners, the very
practice at issue was upheld by the court. See Al Tech Specialty Steel
Corp. v. United States, 10 CIT 743, 751, 651 F. Supp. 1421 (1986)
(court refused to overturn calculation of ``fixed costs merely because
the adjustment is based on subsidies'').
Comment 4: Special Depreciation. Petitioners argue that the
Department should increase SKWP's reported depreciation expense to
account for ``special'' depreciation excluded from COP and CV by the
company. Petitioners maintain that the Department has a consistent
practice of including special depreciation items in its calculation of
respondent's costs and there is no justification for departing from
that practice in this instance.
SKWP insists that it properly excluded special depreciation from
the COP and CV figures it submitted to the Department. SKWP notes that
the special depreciation in question relates to tax-basis depreciation
granted by the German government to companies operating in the former
GDR and, thus, represents no real additional cost to the company and
should not be included in the cost of production. SKWP adds that actual
depreciation (i.e., not tax-related depreciation) is included in SKWP's
fully-absorbed cost of production.
Department's Position: We disagree with SKWP in that, for purpose
of computing COP and CV, we cannot simply ignore the amount that the
company recorded as ``special'' depreciation expense during the POR.
Each year in its accounting books and records, SKWP recognizes what it
maintains is ``normal'' depreciation expense for the year. In addition,
because SKWP operates in the former GDR, German tax law allows the
company to recognize a ``special'' depreciation expense in the year in
which an asset is purchased. Like normal depreciation, the amount of
the special depreciation taken during the year of acquisition reduces
the depreciable basis of the assets. Thus, while the special tax
depreciation may be stated on an accelerated basis which may or may not
reflect the underlying economic useful lives of the assets purchased by
SKWP, to ignore the expense altogether, as SKWP suggests, fails to
recognize as a cost that portion of each asset's depreciable basis that
is written off as special depreciation in the year of acquisition. SKWP
has not provided us with any alternative method of recognizing an
appropriate amount for depreciation expense that is based on the
economic useful lives of the assets purchased by the company. Rather,
SKWP's position is that the Department must exclude special
depreciation costs from COP and CV because the amounts at issue do not
reflect what it calls ``real'' costs. However, as described above, the
special depreciation expense amounts recorded by SKWP do reflect actual
depreciation costs on an accelerated basis. Therefore, absent any other
information on the record from which to derive an alternative measure
of depreciation expense, we have included SKWP's special depreciation
expense in the company's COP and CV.
Comment 5: Other Expenses Excluded from SKWP's Submitted Costs.
Petitioners claim that the Department should include in SKWP's COP and
CV figures certain costs reported by the company in its financial
statements. Specifically, petitioners contend that the Department
should increase SKWP's reported costs for three expense items: amounts
incurred by the company for environmental damages relating to SKWP's
100% owned affiliate, Agrochemie Handelsgesellschaft GmbH (Agrochemie);
amounts incurred for the demolition of certain plant facilities;
[[Page 61274]]
and, costs relating to worker severance pay.
SKWP argues that the amounts reported in its financial statements
for environmental damages and demolition costs were properly excluded
from the costs reported to the Department. According to SKWP, expenses
relating to environmental damages caused by Agrochemie were paid for by
the German government and, therefore, no costs were actually incurred
by the company. With respect to amounts reported for plant demolition,
SKWP contends that the facilities at issue were not involved in the
production of urea and that these amounts, too, were paid for by the
German government.
Department's Position: We agree with petitioners and have adjusted
SKWP's reported COP and CV figures to include amounts for Agrochemie's
environmental damages, demolition of certain SKWP facilities, and
worker severance pay as reported in the company's financial statements.
As part of our cost verification, we reconciled the total amount of
costs reported by SKWP in response to our antidumping questionnaire to
the costs reported in the company's audited financial statements. Our
reconciliation showed that SKWP had excluded from its COP and CV
figures specific income statement items relating to reserves
established for each of the three expense items described above.
Although the record of this case shows that SKWP received funds from
the German government to offset costs incurred by the company for
certain plant renovations and for environmental clean-up at its
nitrogen facility, SKWP failed to show that the receipt of these funds
was specifically related to either the environmental damages caused by
Agrochemie or to the demolition costs at issue. As petitioners note in
their briefs, in past cases, the Department has accounted for expenses
associated with environmental clean-up by respondents as part of the
cost of production where, as in this case, such expenses are included
in respondent's financial statements and reflect costs incurred during
the period of investigation or review. See Final Determination of Sales
at Less Than Fair Value: Stainless Steel Wire Rod from France, 58 FR
68865 (1993). With respect to SKWP's argument that the demolition costs
relate to non-urea facilities, our understanding based on the evidence
in the record is that the amounts incurred relate to the destruction of
factory assets for discontinued operations. As such, we consider these
costs to be related to SKWP's general operations and have therefore
included them in COP and CV.
Comment 6: Reported Costs. Petitioners contend that SKWP has
reported the costs for only one type of urea product and that a second,
more costly type of urea referred to as ``konf.'' in the verification
exhibits, was manufactured by SKWP during the POR. Petitioners maintain
that cost verification exhibits do not support SKWP's contention that
``konf.'' urea is actually bagged urea since these exhibits show an
amount for packing costs in the cost center report for what SKWP claims
is bulk urea. Petitioners argue that the Department must increase
SKWP's reported COP and CV to reflect the weighted-average cost for the
two types of urea produced by the company.
SKWP maintains that ``konf.'' urea is, in fact, bagged urea, and
that the Department verified packing costs associated with bagged urea
as part of its sales verification. SKWP adds that the Department has
factored the company's reported packing costs for bagged urea into its
COP analysis.
Department's Position: We disagree with petitioners that SKWP
failed to report the costs of a second type of urea that it produced
during the POR. SKWP manufactures and sells urea in both bulk form,
called ``lager lose,'' and in bagged form, or ``konf.'' In response to
the Department's cost questionnaire, SKWP reported the cost of urea in
bulk form only. The company reported the additional packing costs it
incurred for bagged urea on a transaction-specific basis in response to
the Department's sales questionnaire. In performing our COP test of
SKWP's home market sales, we adjusted for the packing costs associated
with bagged urea by deducting the reported amount from the home market
sales price before comparing that price to the COP for bulk urea. Thus,
to compute a single weighted-average cost for both bulk and bagged
urea, as petitioners advocate, would result in an overstatement of
costs.
With respect to petitioners observation that SKWP's cost center
report for bulk urea shows an amount for packing costs, we note the
fact that these amounts represent insignificant costs of less than one
DEM per metric ton that are associated with packing bulk urea for sale.
SKWP included these costs in its reported COP and CV amounts for bulk
urea.
Comment 7: Labor Costs. Petitioners contend that a substantial
portion of costs associated with SKWP's labor force are unaccounted for
in the company's reported COP. In support of their claim, petitioners
point to an agreement by SKWP to employ a minimum number of the workers
formerly employed by STAG. Petitioners note the fact that, during the
POR, the actual number of workers employed by SKWP exceeded the
company's commitment level. According to petitioners, because SKWP
developed its accounting systems subsequent to the date of the
antidumping duty order, the company may have inappropriately assigned
(or absorbed) excess personnel costs in areas responsible for producing
non-subject merchandise, thereby artificially understating labor costs
for urea.
As further evidence of their claim that SKWP may have understated
its labor costs for the subject merchandise, petitioners assert that
ammonia production reports obtained by the Department during its cost
verification show what petitioners believe is a small percentage of the
company's total workforce assigned to production of the input, and that
there is no other evidence on the record to show the number of urea
production workers.
SKWP argues that the Department thoroughly verified the company's
cost centers and found that all labor costs had been appropriately
allocated and accounted for. SKWP maintains that it is puzzled by
petitioners' claim with respect to the number of workers in its ammonia
production facility, noting that such facilities are not labor-
intensive operations. SKWP also points out petitioners' own admission
that personnel expenses are also accounted for through factory overhead
and general and administrative (G&A) expenses.
Department's Position: We disagree with petitioners assertion that
the analysis contained in their brief provides any basis for us to
believe that SKWP may have understated its labor costs for urea.
Rather, based on the results of our verification, we find that SKWP
properly accounted for all labor costs incurred to produce the subject
merchandise. Thus, for the final results of this review, we have not
adjusted SKWP's labor costs as argued by petitioners. In a pre-
verification letter to the Department dated April 2, 1997, petitioners
expressed their concern that, in light of SKWP's commitment to employ a
minimum number of former STAG employees, the variable overhead figure
reported by SKWP appeared low. Based on this, petitioners requested
that, as part of verification, ``SKWP should explain how it has
accounted for all labor costs.'' During verification, SKWP did, in
fact, provide a full explanation of the methodology it used in its
normal books and records to account for labor costs incurred to produce
both subject and non-subject
[[Page 61275]]
merchandise. Moreover, SKWP personnel demonstrated how that methodology
was used to calculate the COP and CV data submitted to the Department.
As described in SKWP's cost response and in the Department's cost
verification report, SKWP charges labor costs, as well as other
production costs, to a series of cost centers by cost type. The amounts
charged to each ``cost type-cost center'' are then distributed in a
multi-stage allocation to ``process-cost centers'' maintained by SKWP
for both subject and non-subject merchandise. As explained in the
Department's cost verification report, Department verifiers examined
how production costs incurred within each of the various cost type-cost
centers were allocated to the various process-cost centers under SKWP's
accounting system. See Cost Verification Report at page 21.
In their case brief, petitioners cite to a list of participants at
the cost verification as evidence that the Department verifiers
examined only the labor costs incurred by SKWP in the production of
ammonia and urea, and neglected to review the labor allocations to non-
subject merchandise. Moreover, petitioners argue that verification
exhibits collected by the Department show only the number of workers
employed by SKWP at its ammonia production facility. While we do not
believe that the participants list cited by petitioners provides any
indication of the testing performed during verification, the
Department's cost verification report does explain that the verifiers
examined carefully amounts charged to, and allocated from, the various
cost type-cost centers, including amounts incurred for labor costs.
With respect to the ammonia production reports cited by petitioners,
the verification report makes clear that these documents represent
examples of the supporting documentation reviewed by the verifiers as
part of their testing of SKWP's cost type-cost centers. As stated in
the report, although the Department verifiers reviewed costs recorded
in, and charged from, each category of cost type-cost center (including
those in which SKWP recorded its labor costs), they did not collect as
verification exhibits copies of all cost center reports. In fact, to
have collected copies of all documents examined during verification
would have placed an extreme and unnecessary burden on the respondent
in this case.
Comment 8: Factory Overhead. Petitioners note that SKWP's reported
factory overhead costs contain an adjustment that reduces a portion of
those costs. Petitioners contend that there is no evidence on the
record concerning the nature of this adjustment. According to
petitioners, if, upon re-examining the record of this case, the
Department finds that the amount of the adjustment is not justified, it
should increase SKWP's factory overhead costs accordingly.
SKWP asserts that petitioners are overreaching when they request
that the Department adjust the company's factory overhead costs for an
offset that is included among thousands of other numbers contained in
the record of this case. SKWP argues that its factory overhead costs
should be accepted as reported since those amounts were verified by the
Department.
Department's Position: For the final results of this review, we
have not adjusted SKWP's factory overhead costs for the offset. The
offset represents miscellaneous income earned by SKWP's Cunnersdorf
research facility for projects conducted on behalf of outside parties.
We did not describe the offset in our cost verification report simply
because, relative to the production costs at issue in this case and the
complexity of SKWP's cost accounting system, it is insignificant.
Technically, because the work conducted was not so significant as to
represent a separate line of business (and, thus, be excluded from COP
and CV altogether), both the revenues from the projects and the
associated R&D costs would more appropriately be considered part of G&A
expense. However, in this instance, reclassification of these amounts
would have little, if any, effect on SKWP's submitted costs. Thus, as
noted above, we have not made any adjustments to SKWP's reported
factory overhead costs.
Comment 9: Sales Reporting. Petitioners argue that SKWP only
provided sales information on certain types of urea without consulting
the Department. Petitioners insist that the Department should affirm in
the final determination the inappropriateness of this unilateral
modification.
Respondent argues that they reported all home market sales of
identical merchandise rather than sales of the foreign like product.
They claim that they did this in accordance with the statute at Section
773(a)(1) and Section 771(16)(A). Respondent also argues that the
Department implicitly acknowledged this requirement when it advised
SKWP that its omission of sales of non-identical merchandise may result
in the use of facts available. Due to the fact that the Department's
analysis indicates that only sales of identical merchandise were
necessary for comparison purposes, petitioners' concerns are not
justified.
Department's Position: During the review, SKWP only provided home
market sales information of identical merchandise. In an October 30,
1996, letter to the respondent, the Department notified SKWP that
failure to report the entire universe of the foreign like product may
result in the Department using facts available, particularly if the
Department determined after further analysis and verification of all
relevant data that the omitted sales were necessary for comparison
purposes. As evidenced by the preliminary results of review, the
reported home market sales database of identical merchandise was
adequate for making comparisons to the U.S. sales database and the
omitted sales were not necessary for comparison purposes.
Comment 10: Model Match. Petitioners argue that SKWP
inappropriately added a product characteristic in the model matching
section and has not justified this modification. Petitioners argue that
although there is no difference in the material costs of the two
products, there is a difference in selling price. Additionally,
petitioners argue that due to the fact that the U.S. sale is of one
particular type of urea, SKWP's reporting methodology would cause the
Department to select only certain home market sales for comparison
purposes. Therefore, the Department should reject SKWP's reporting
methodology. Alternatively, petitioners argue that if the Department
accepts this SKWP's reporting methodology then it should adjust the
cost for the second type of urea to ensure that all costs for all
models are properly accounted for.
Respondent rebuts petitioners' argument by stating that the
Department's questionnaire allows for the modification of the product
characteristics if necessary. Respondent also objects to petitioners
claim that the modification of the physical characteristics resulted in
the comparison of U.S. sales to home market sales of similar
merchandise. Respondent argues that due to the fact the record
demonstrates that both types of urea are physically different products,
comparison of one with the other is inappropriate.
Department's Position: The Department agrees with respondent. The
Department's model match allows for respondent to report additional
product characteristics if necessary. As evidenced by the preliminary
results of review, the Department was able to compare the U.S. sale to
the most comparable home market sale(s) and ensure that there were no
distortions in the analysis. Based on the fact that there
[[Page 61276]]
is no evidence on the record to show that the product characteristics
reported resulted in a distortive comparison, the Department has
continued to use the model matching criteria set forth in the
preliminary results of review.
Comment 11: Downstream Sales. Petitioners argue that sales from
Agrochemie were not reported to the Department. Petitioners contend
that SKWP has not indicated that it is otherwise justified in its
reporting methodology, therefore, there exists the strong possibility
for SKWP to avoid reporting less favorable home market sales to end-
users by manipulating the transfer price to Agrochemie. Petitioners
argue that the Department must increase normal value to reflect
Agrochemie's profits on the resale of urea through its reseller.
Because there is no evidence of Agrochemie's sales prices on the
record, petitioners argue that the Department should use facts
available regarding VCE's profit level to determine the selling price
to Agrochemie's final customer.
Respondent argues that petitioners' request is without merit.
Respondent asserts that the purpose of the arm's length test is to
determine if the prices for sales between affiliated parties may have
been manipulated to lower normal value. However, due to the fact that
the Department found that sales to Agrochemie were at arm's length it
would be inappropriate to penalize SKWP for avoiding the burden of
reporting downstream sales that the Department did not require for its
analysis.
Department's Position:. The Department agrees with respondent.
During the review, SKWP did not report sales made from Agrochemie to
unaffiliated customers in the home market. In an October 30, 1996,
letter to the respondent, the Department notified SKWP that failure to
report the Agrochemie sales to the first unaffiliated party may result
in the Department using facts available, particularly if the Department
determined after further analysis and verification of all relevant
data, that these omitted sales were necessary for comparison purposes.
As evidenced by the preliminary results of review, the Department found
that SKWP's sales to Agrochemie were at arm's length and these omitted
sales were not necessary for comparison purposes.
Final Results of Review
As a result of our review, we determine that the following
weighted-average margin exists:
------------------------------------------------------------------------
Margin
Manufacturer/exporter (percent)
------------------------------------------------------------------------
SKW Piesteritz............................................. 0.00
------------------------------------------------------------------------
The Department shall determine, and the Customs Service shall
assess, antidumping duties on all appropriate entries. Individual
differences between export price and normal value may vary from the
percentage stated above. The Department will issue appraisment
instructions on each exporter directly to the Customs Service.
Furthermore, the following deposit requirements will be effective
upon publication of this notice of final results of review for all
shipments of subject merchandise entered, or withdrawn from warehouse,
for consumption on or after the publication date, as provided by
section 751 (a)(1) of the Act: (1) The cash deposit rate for the
reviewed company will be the rate listed above; (2) for previously
reviewed or investigated companies not listed above, the cash deposit
rate will continue to be the company-specific rate published for the
most recent period; (3) if the exporter is not a firm covered in this
review, a prior review, or the original LTFV investigation, but the
manufacturer is, the cash deposit rate will be the rate established for
the most recent period for the manufacturer of the merchandise; and (4)
for all other producers and/or exporters, as indicated in the
preliminary results of this review, the cash deposit rate shall be
44.80 percent, the ``all others'' rate established in the LTFV
investigation (53 FR 2636). These deposit requirements shall remain in
effect until publication of the final results of the next
administrative review. In addition, we are terminating suspension of
liquidation for shipments of solid urea produced by other firms in
Germany.
This notice serves as a final reminder to importers of their
responsibility under 19 CFR 353.26 to file a certificate regarding the
reimbursement of antidumping duties prior to liquidation of the
relevant entries during this review period. Failure to comply with this
requirement could result in the Secretary's presumption that
reimbursement of antidumping duties occurred and subsequent assessment
of double antidumping duties.
Notification to Interested Parties
This notice also serves as a reminder to parties subject to
administrative protective order (APO) of their responsibility
concerning the disposition of proprietary information disclosed under
APO in accordance with 19 CFR 353.34(d). Timely written notification of
return/destruction of APO materials or conversion to judicial
protective order is hereby requested. Failure to comply with the
regulations and the terms of an APO is a sanctionable violation.
This administrative review and notice are in accordance with
section 751(a)(1) of the Act (19 USC 1675(a)(1)) and 19 CFR 353.22.
Dated: November 5, 1997.
Robert S. LaRussa,
Assistant Secretary for Import Administration.
[FR Doc. 97-30144 Filed 11-14-97; 8:45 am]
BILLING CODE 3510-DS-P
